ESG momentum drives outperformance across ASEAN markets: CGSI

In Malaysia, the FBM100 Pos portfolio achieved 150.1% cumulative returns and 6.27% annualised alpha.

ESG investing in ASEAN markets is no longer a niche strategy but a repeatable source of alpha, according to a new report by CGS International Securities (CGSI).

The firm’s latest analysis showed that companies demonstrating ESG improvement significantly outperformed their benchmarks across the region between 2020 and 2024.

“Portfolios constructed using our proprietary ESG rating system and dual screening approach... both outperformed benchmarks across ASEAN markets,” CGSI stated in its strategy report Doing Good Pays Off: Part II.

Using a methodology that screens for companies with improving ESG momentum rather than just high static scores, CGSI’s positive-screened portfolios delivered cumulative returns of up to 232% over the four-year period.

In comparison, benchmarks like the MSCI All-Caps ASEAN index posted returns under 100%.

In Malaysia, the FBM100 Pos portfolio achieved 150.1% cumulative returns and 6.27% annualised alpha. In Thailand, the SET100 Pos returned 118.5%, also outperforming both its benchmark and the negative-screened counterpart.

According to the report, “These results affirm the framework’s effectiveness across diverse disclosure regimes... with lower drawdowns and tighter tail risks.”

CGSI argued that ESG integration has moved beyond compliance to becoming a meaningful investment signal.

“It is clear that ASEAN’s ESG landscape has matured from marketing narrative to viable investment signal,” the report noted. ESG leaders increasingly benefit from “lower cost of capital and investor preference,” whilst laggards face penalties including exclusion from ESG indices, financing headwinds, and trade risks.

One example cited in the report is Energy Absolute (EA.BK) in Thailand, which lost over 60% of its market value in two days following a governance scandal in July 2024.

“Despite its green credentials, EA was cut from the SET ESG list and lost institutional support,” CGSI wrote, underscoring the financial consequences of governance failures.

The report also credited regulatory tailwinds across the region. “From 2022 to 2025, ASEAN policymakers introduced a wave of regulatory developments that redefined ESG from a voluntary signal to a disclosure imperative,” CGSI stated.

Countries such as Malaysia, Singapore, Indonesia, and the Philippines now require mandatory ESG disclosures aligned with international standards like ISSB and TCFD.

Institutional investors are taking note. Malaysia’s Employees Provident Fund (EPF), Singapore’s Temasek, and Thailand’s Government Pension Fund (GPF) have all adopted ESG-focused mandates.

According to CGSI, “Allocation decisions are increasingly based on ESG trajectory signals... ESG momentum is no longer aspirational. It is already embedded in active capital allocation decisions.”